In Depth: Standing out in the schemes market

In an increasingly competitive commercial market, it’s more important than ever for brokers to find ways to stand out. Developing a robust book of specialist schemes business is one way to do this.

Building a deep sector knowledge is the key to reaping the benefits of schemes business.

“By really understanding the sector and your clients, you’ll be able to evolve the proposition and wordings to meet clients’ needs. You need to stay abreast of any changes in requirements, so you can adapt to continue to meet their needs, says Nathan Anders, specialist schemes director at Towergate Insurance Brokers.”

Anders looks after a variety of schemes at Towergate, including one that is focused on the licensed trade and the 17 schemes set up through Walker Midgley Insurance Brokers, which includes steam traction engines, vintage tractors and rally organisers.

“Schemes require knowledge, competence and strong relationships, but they can also be very rewarding,” he adds.

Scheme benefits

As well as helping to differentiate your business, developing a scheme or specialism can give you access to a potentially large market. Whether by word of mouth, association with a particular sector, or trade body endorsement, a scheme can take some of the hard work out of finding business.

Just being in a niche area can benefit your business according to Simon Lancaster, founder owner and CEO of SJL Insurance. “Specialise in a particular area, for instance beauty and aesthetics, and you’re much more likely to appear on the front page of a web search than if your business is more general,” he explains.

Schemes also tend to have higher retention rates. “It’s very hard for this type of business to be taken away. If there’s something unique about the cover that demonstrates a greater understanding of the customer’s needs, it can really build loyalty,” says Alastair Christopherson, CEO of The County Group.

In turn, this will help to move the conversation away from one that is solely focused on price to one that is concerned with the benefits of a bespoke proposition and enhanced wordings.

The pandemic has also made business owners much more aware of the value of insurance and the cover it offers them.

“They want to know the nuances that are relevant to their sector. Many businesses had to adapt overnight during the pandemic, especially at the micro-SME level. A scheme can give them the reassurance that they’ve bought cover from a broker that understands their needs,” says Jonathan Forster, SME distribution director at Travelers Europe.

It can deliver a more rewarding experience for the broker. For some, it might be the ability to combine a passion such as classic cars or model railways with their job, while for others it could be the opportunity to get under the skin of a particular sector that sparks their interest.

Identifying potential

A potential scheme can be identified in a number of different ways.

“In some cases, a broker will build up their knowledge of a sector through their experience with clients. They might start with just one cricket club as a client, and then build up their expertise and client base to the point where a scheme would work,” says Forster.

Brokers will also proactively seek out scheme opportunities. Lee Scott, director at Aston Lark, says there is always research and development going on to identify new schemes.

“We usually have between five and 10 ideas that we’re looking into. It might be a future scheme such as insect farming that we’ll look to understand now before it becomes a viable proposition, or it might be an area that we know will struggle to get cover, where we could add value,” he explains

The idea for a insurance scheme can by driven either by the interests of an employee or by one of your friends or family members.

“Our horse box insurance came about because three women in our office were really keen on horse riding and could see a gap in the market. They understood exactly what the issues were and the cover that was needed,” explains Christopherson.

Even the heritage of some brokerages puts them in an ideal position to specialise in certain sectors. As an example, H&H Insurance was set up in 1987 to offer insurance to the rural clients of the broader group. These include a land and estates business, and a livestock sales centre, which famously sold a prize heifer called Posh Spice for £262,000 in 2021.

“Our connections with the group mean we’ve developed a number of schemes in the agricultural market, including breeding warranties and Luckpenny insurance,” says Paul Graham, managing director at H&H Insurance Brokers.

“Our understanding of the needs of our customers creates trust with them but also with our insurer partners.”

Supporting evidence

Once a niche is identified, it’s about determining what will make the scheme a success. It’s essential to think through your ideas carefully before approaching an insurer.

“It takes time and financial investment to set up a scheme, so pick your horses carefully. If you present an insurer with a scheme idea without sufficient evidence it’ll be a success, then you risk losing credibility with them,” Lancaster says.

Demonstrating that a scheme is worth backing requires a range of information.

“Data is king. A broker must have rich data to support a scheme idea. This might include details of exposure, policy information and claims data, but they should be able to enrich it in some way through their knowledge of the sector,” says Matt Schofield, chief underwriting officer at Q Underwriting.

Brokers who specialise in a particular sector can use existing business to support their scheme proposal. For instance, when Graham was putting together his livestock scheme, he was able to use 10 years’ worth of data from existing business to show insurers that it was a viable proposition. Where it’s a completely new idea, and there’s no data available, it can be more difficult to put together all the supporting evidence.

“It’s a bit of a chicken and egg scenario. All new schemes are speculative. But if you know it’s going to make the grade, then spend 12 months writing as much of that type of business as you can in the open market,” says Peter Knowles, sales and marketing director at Lycetts.

Forward-looking

As well as data on the past performance of similar lines of business, insurers expect to see evidence to support future predictions. Chris Lennon, sales and development director at Specialist Risk Insurance Solutions, specialises in schemes for sectors such as waste and recycling, asbestos removal and building merchants.

“To reassure insurers, we examine other areas, including risk management, compliance and business continuity. Just because a client sector hasn’t had claims, it doesn’t mean they won’t – claims free doesn’t always mean good; it can mean lucky,” he explains.

Having the right people in place is another essential component when launching a scheme, and it may be necessary to recruit or upskill staff to ensure you have the right expertise to look after the account.

“If someone comes to us from within the business with the idea, then there’s no one better to look after the scheme. We have 28 different scheme focuses from film and media to funeral directors, and our employees will specialise in a particular sector. There’s no room for a jack of all trades in schemes: it’s all about being a specialist,” says Scott.

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